Today’s market drop of almost 5% will make front-page headlines tomorrow, and retail investors (who seldom read business news) will not take it well.
It’s not that people are panicking (yet) so much as giving up. Faced with debt ceiling debate stress, the prospect of defaults in Europe and slowdowns in China, they are simply packing it in. They are saying, “enough of this,” and selling.
It all started last Thursday, when investors began moving out of US stocks (or US anything) due to the uncertainty of the debt ceiling. For almost a week, news viewers were inundated with stories about "unpayable debt" and "market uncertainty." And, once uncertainty takes hold, it is ravenous.
For the unexceptional investor, not knowing whether or not something terrible will happen is even worse than knowing that something terrible will happen.
Just a few days ago I viewed the market drop as an unnecessary annoyance, caused by a few idiots in Congress. Now that the drop is significant, however, this is looking more and more like an opportunity (or a rout, depending upon your financial preparedness).
I plan to mix myself a rum and Coke, and have fun watching the lemmings sell their stocks for less then they are worth, out of fear. There is now enough negativity in the market to assure at least several days of rollercoaster rallies and dives.
In the following months, junior precious metal miners like Nevsun Resources (NSU) and Great Western Minerals Group (GWG) should profit well from the uncertainty. Leper stocks, such as Bank of America (BAC) and Barclays (BCS) are already great bargains, and may get even cheaper.
Stay away from the overbought stocks that retail brokers have been recommending for weeks: precious metal ETFs, tech stocks, emerging markets (ex. China and India), and Canadian banks.
Be aware that this could get ugly before it gets better. Keep your head.
____
"I see no reason why 1931 should not be an extremely good year."
Alfred P. Sloan Jr. of General Motors, 1930
____
Disclosure
Do not buy stocks, or take this or any other financial advice without doing your own analysis; including, but not limited to: reviewing business models, financial statements, management style and philosophy, recent developments, market macroeconomic analysis, and chart analysis. If you do not know how to do these things, you shouldn't be buying stocks in the first place. Seek the advice of professionals, as appropriate.
____
